First City CU Questions Fraud Charges on Loss

O’Steen told Credit Union Times that First City suffered a $5,000 net loss in 2007 when it charged off a credit card balance that Washington didn’t pay. However, to O’Steen’s knowledge, Washington did not defraud First City as alleged in U.S. District Court and reported in local and industry media.

“Yes, he owed us money and didn’t pay, but that’s not fraud,” O’Steen said.

The Los Angeles-based CEO said he hadn’t been contacted by authorities regarding the case or provided any documentation, nor had he seen the grand jury’s indictment that prompted Washington’s Sept. 17 arrest.

O’Steen said he assumes Washington revealed he had done business with First City when he was interviewed by prosecutors.

The indictment alleges that Washington defrauded multiple financial institutions by running up credit card balances and later claiming he hadn’t made the charges, but had instead been a victim of identity theft. Washington then allegedly filed false police reports and submitted them to Experian, asking the credit reporting agency to remove the affected credit histories from his credit report. Then, using a clean credit report, Washington repeated the scam by applying for new credit at other institutions.

Counts one and four against Washington allege that on Oct. 19, 2007, he submitted an application for a Visa credit card to First City Credit Union and purposely omitted creditor obligations.

O’Steen said he would review the court documents and further research Washington’s account history to determine if any fraud had been committed. The CEO said Washington was eligible to join First City because he is a Los Angeles County employee, employed by the county’s Probation Department; county employees are the credit union’s legacy select employee group.

The indictment also alleges in counts three and six that Washington defrauded the $360 million LA Financial Federal Credit Union, located in Pasadena, Calif., by making false statements on a credit card application on August 4, 2009.

The court documents further state that Washington falsely claimed to Experian that credit reports from the $23 million Mid-Cities Financial Credit Union, located in Compton, Calif., were the result of identity theft. However, the indictment does not include any criminal charges connected with Mid-Cities.